Wanxiang America, the U.S. arm of a Chinese auto-parts giant, won the bidding for bankrupt A123 Systems, a lithium battery manufacturer once hailed as a cornerstone of President Obama's quest for American dominance in electric vehicles and battery technology

Wanxiang America, the U.S. arm of a Chinese automotive-parts giant, won the bidding for a bankrupt Massachusetts-based lithium battery manufacturer once hailed as a cornerstone of President Obama's quest for American dominance in electric vehicles and battery technology.

A123 Systems announced Sunday that Wanxiang would pay $256.6 million for all of A123's technology, its manufacturing facilities in the United States and China, and its contracts with utilities seeking grid storage and automakers seeking batteries for electric and hybrid vehicles.

Wanxiang would not acquire A123's Ann Arbor, Mich.-based government business, which includes all U.S. military contracts. Those would be acquired for $2.25 million by Navitas Systems, a Woodridge, Ill.-based provider of energy-storage products for commercial, industrial and government agency customers.

Wanxiang, which has been investing the United States since 1994 and has 3,000 U.S. employees, beat out Johnson Controls and two foreign firms, Japan's NEC and Germany's Siemens.

The Chinese company is one of China's biggest private firms with worldwide revenue of $8 billion, and it said this is its fifth "clean energy" investment in the United States this year.

Johnson Controls, whose bid for automotive and government businesses was paired with NEC's bid for grid storage and commercial business, said it dropped out of the bidding Saturday.

"Wanxiang's offer was beyond the value of those assets to Johnson Controls," Alex Molinaroli, president of Johnson Controls power-solutions subsidiary, said in a statement Sunday.

The auction had sparked criticism from some leading lawmakers and others who said that a classified A123 contract with the Defense Department was reason to block a Wanxiang purchase.

In addition, many GOP lawmakers used the auction of A123, which received $133 million in Energy Department grants under the American Recovery and Reinvestment Act of 2009, to allege t the Obama administration had made poor use of taxpayer money. Others said that a foreign company shouldn't benefit from technology developed, in part, with public funding.

"This is the latest in a seemingly continuous cascade of predictable, supersized clean-tech commercialization failures, which unfortunately hemorrhages our critical national technology and intellectual-property advantages to the Chinese and other economic competitors," said Andy Karsner, who under President George W. Bush was assistant energy secretary for efficiency and renewables with responsibility for vehicle technologies.

But Wanxiang's top executive and an Energy Department spokesman said last week the point of the grant was to create jobs by building a Michigan manufacturing facility, which Wanxiang said it plans to keep. The money was not for research, the Energy Department said.

"We think adding A123 to our portfolio of businesses strongly aligns with our strategy of investing in the automotive and clean-tech industries in the U.S.," Ni Pin, president of Wanxiang America, said in a statement Sunday.

Ni said last week that Wanxiang would not move jobs to China, where A123 has a manufacturing facility and owns a piece of Shanghai Advanced Traction Battery System, a joint venture with Shanghai Automotive.

A123 spokesman Dan Borgasano said that about half the company's 2,000 employees are in the United States and about half in China.

A123 said Sunday that the total purchase price would fall short of the total amount owed to creditors. The company said that therefore its creditors would not recover any money and that its stock has no value.

The deal still requires approval from the U.S. Bankruptcy Court and the Committee for Foreign Investment in the United States, an interagency group overseen by the Treasury.